EU Wheat Firmer, UK Production Prospects Look Grim

16/04/13 -- EU grains closed mostly firmer, with a weaker pound/stronger euro saw London wheat fare better than Paris wheat on the day.

London wheat closed with front month May 13 up GBP3.15/tonne to GBP197.95/tonne and new crop Nov 13 up GBP1.85/tonne at GBP185.95/tonne. May 13 Paris wheat closed EUR0.25/tonne firmer at EUR246.25/tonne.

At home, Carr's CEO told Agrimoney that he expects the UK wheat crop to fall to around 11.0 MMT this year, which would be a 17% drop on last season's disaster, and the lowest production in 30 years. Certainly that would see the UK feature as a major wheat importer again in 2013/14, although it doesn't necessarily mean that GBP200/tonne plus for new crop is assured. The cost of wheat, and corn, imports from abroad will decide that.

Ukraine, potentially one of the UK's leading suppliers, says that early spring grain plantings there are 50% complete at 1.46 million hectares, including 1.2 million of barley. The Ministry there say that the country's grain stocks at the start of the month stood at 18.0 MMT, versus a domestic usage requirement in the last quarter of 2012/13 of 7.4 MMT. With ending stocks projected at 5.5 MMT, that leaves them a further 5.1 MMT to comfortably export between now and the end of the season.

With grain exports this season so far standing at 20.2 MMT, they could therefore end up shipping in excess of 25 MMT in 2012/13, versus the current Ministry estimate of 24.6 MMT.

Meanwhile winter grains there are rated 92% good/excellent. UkrAgroConsult last week estimated wheat production in Ukraine at 20.23 MMT, up 28% on last year. Corn output is forecast at 21.8 MMT versus 20.92 MMT in 2012/13, making them aggressive likely exporters of both grains again in 2013/14.

Russian grain production is set to rebound this season, although opinions vary on by how much. The lowest estimate in the ring at the moment is 85 MMT and the highest 92 MMT. Even the lowest figure represents an increase of 20% on last season, with the upper figure nudging at 30%. The government will be looking to replenish their low intervention stocks next season for sure, although the levels at which they have indicated that the would wish to enter the market are still significantly lower than current prices.

Egypt meanwhile remain absent from the international tender market, saying that they've made progress with the IMF in their loan request, but that no deal has been done yet. The size of their 2013 wheat crop is shrouded in mystery despite that fact that harvesting of it should begin this month. The government say that they will harvest a record 9.5 MMT of wheat this year, based on a highest ever winter wheat planted area of 1.43 million hectares. Many analysts however say that this estimate is wildly optimistic given fertiliser and diesel shortages and that 6-7 MMT may be nearer the mark.

A return to more like seasonally normal temperatures in France in recent days should see a significant improvement in crop conditions and spring corn planting progress there in Friday's weekly report. German wheat is estimated to be 2-4 weeks behind normal growth, but should also benefit from much warmer temperatures this week.

US spring wheat plantings are only 6% done versus 13% normally. Winter wheat crop ratings held steady at 36% in the good/excellent category last night, contrary to trade expectations of a drop due to last week's hard freeze. Maybe the effects of that will show up on next week's report? On the other hand, maybe the fact that the crop is showing retarded development versus normal actually kept damage to a minimum.